How To Successfully Annihilate Your IRA During Retirement
And How Lifetime Income Annuities Help You Defeat The IRA Tax Trap

Pretty weird title for a financial article, right?  

Well, bear with us, because this is a really profound concept...


The Problem: The SECURE Act Wrecked the Traditional IRA for Inheritance
 

When the original SECURE Act passed in 2019—and was later reinforced by SECURE Act 2.0—it sent shockwaves through the retirement planning world. The most dramatic change? The death of the "Stretch IRA."
 

Prior to the SECURE Act, your children or grandchildren could inherit your IRA and “stretch” the Required Minimum Distributions (RMDs) over their own life expectancy—often allowing tax-deferred growth for decades.
 

But now?
 

For most non-spouse beneficiaries, the entire IRA must be liquidated within 10 years of inheritance. No more multi-decade tax deferral.

No more income smoothing. Just a ticking tax time bomb that forces heirs to pay taxes quickly, often during their highest earning years—when it’s most painful.
 

This new rule turns what was once considered a smart estate asset into one of the worst assets you can leave behind.

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Better Assets to Leave Behind (And Why They’re Superior From a Tax Standpoint)
 

Let’s contrast the traditional IRA with other types of assets that are far more favorable to pass on to your heirs:
 

1. Roth IRAs
 

Roth IRAs are the most tax-efficient asset you can leave to the next generation. While the 10-year rule still applies, there are no RMDs during that 10-year window—and all withdrawals are completely tax-free. That gives your heirs total control to time distributions as they please and to allow the account to continue growing tax-free until year 10.
 

2. Cash Value Life Insurance
 

Properly structured permanent life insurance provides both tax-free growth and a tax-free death benefit. This allows your beneficiaries to receive a lump sum without ever having to report it on their income tax return. It’s also not subject to RMDs, and doesn’t trigger a 10-year spend-down clock.
 

3. After-Tax Brokerage Accounts (Non-Qualified)
 

Even though these accounts grow with taxable capital gains and dividends, they have a huge tax advantage at death: a full step-up in basis. That means if your investments appreciated significantly, your heirs can sell them immediately after inheriting them with zero capital gains tax. It’s an elegant way to preserve generational wealth while keeping full control and liquidity during your lifetime.
 

 

Why Growing a Big IRA is Now a Tax Trap
 

Let’s be clear: The more you grow your traditional IRA, the more you’re growing a future tax bill—both for yourself and your heirs. For decades, conventional wisdom said “defer, defer, defer”—but that logic is now outdated.
 

Every dollar you grow inside a traditional IRA is a dollar that will eventually be taxed as ordinary income, not long-term capital gains. Worse, if your heirs are in their peak earning years when they inherit it, the withdrawals could be taxed at the highest marginal brackets.
 

And here’s the mic-drop:
 

“We all know Einstein said compound interest is the 8th wonder of the world—but with IRAs, the more you compound the gains, the more you’re compounding the taxes for yourself and the next generation.”

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How Annuities Help You Beat the Tax Bomb
 

Let’s say you’re starting retirement with a $1 million traditional IRA. That sounds like a solid nest egg—until you realize that every dollar in that account is fully taxable. But here’s the strategic opportunity: depending on your exact age and the current interest rate environment, you can convert a portion of that $1 million into guaranteed income—and use the rest to reposition your wealth into more tax-efficient assets.
 

At today’s annuity payout rates, it’s possible to find lifetime income annuities that can pay out around $60,000 per year from just $800,000 of capital. This is significantly higher (40-50% higher) proportionate income than what $800,000 would normally produce under a conventional income method like the 4% withdrawal rule or living of a 5% fixed rate or dividend.  

And the moment you realize that, you unlock a high-leverage way to use the IRA against itself—turning one of the most tax-hostile assets in your portfolio into an engine for tax-smart estate planning.
 

Here’s how:
 

1. Higher Income Using Less Capital
 

Let’s say (at today’s annuity rate environment) properly structured annuity can generate $60K of guaranteed lifetime income from as little as $800K of capital. As mentioned, that is dramatically more than what you’d safely withdraw from a typical investment portfolio using the 4% rule. And because you're using less capital to generate higher income, it frees up other assets for Roth conversions or non-qualified reinvestment.
 

2. Enhanced RMD Aggregation Benefits
 

If part of your IRA is generating lifetime annuity income, it can be used to satisfy your entire IRA household’s RMD requirement —even for non-annuity IRA accounts. That means you’re meeting IRS requirements using income you already wanted, while allowing the rest of your IRA assets to stay invested longer and grow.

This is helpful… but it’s still not the most powerful play.

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The Leveraged Roth Conversion Strategy
 

Here’s where it really gets exciting. If you can generate all the income you need from just a portion of your IRA using annuities, you can begin converting another portion to a Roth IRA—strategically, over time.
 

Using basic math:

If you convert $200,000 (of that original $1 million in the example above) into a Roth and earn 8% annual return, it grows back into $1,000,000 in 20 years—tax-free.
 

Meanwhile, you’ve used the remaining $800,000 to fund an annuity ladder that pays out $60,000/year for life. That’s $1.2 million of lifetime income over 20 years.
 

Let’s take out 20% for taxes and say you only need $30K/year to cover your expenses. That leaves you with roughly $20,000/year of surplus income.
 

Instead of spending it, you re-save that $20k per year surplus into a simple brokerage account at the same assumed 8% rate. That $20K/year turns into another $1 million over 20 years—with a full step-up in basis at death, meaning it can pass tax-free to your heirs.
 

 

Pulling it All Together
 

Let’s recap:
 

• You start with a $1 million IRA.

• You convert $200K to a Roth, paying taxes using outside savings.

• The Roth grows tax-free to $1 million over 20 years.

• The remaining $800K goes into the annuity, producing $60K/year of lifetime income.

• Over 20 years, that’s $1.2 million in income, much of it spent—but $20K/year of surplus is reinvested.

• That reinvested portion becomes another $1 million in a taxable account, with step-up basis protection.
   

By age 85:
 

• You’ve received $1.2 million in income

• You’ve rebuilt $2 million in assets in tax-favored locations

• You’ve zeroed out the taxable IRA from your estate

• And you still get to keep receiving $60k per year of income for life—even though the original IRA is gone.
   

Oh, and if you don’t make it the full 20 years, the beneficiaries still receive the remaining portion of IRA principal that hasn’t yet been paid out, plus whatever amount has already regrown inside the separate Roth.  

Either way, this can be designed and structured with the intent that the total $1million overall portfolio balance is not only in tact at all times -  it is eventually doubled over time - and ultimately passed down tax-free to the heirs. 

 

 

The IRA Annihilation Strategy (On Purpose)
 

Here’s the counterintuitive truth no traditional advisor is talking about:
 

You WANT to deplete your IRA balances to zero during your lifetime.
 

Why?
 

Because you want to zero them out of your estate. Annuities give you the power to destroy that asset (as strange as that may sound) while still extracting maximum value in the form of lifetime income you can never outlive.
 

You’re essentially getting forever-income benefits from an asset you no longer have to own. That gets the tax bomb off your estate balance sheet, while still allowing you to enjoy income from it—for as long as you live.  

Is that incredible leverage or what?  

While your IRA annuity is depleting principal, your other non-IRA / non-annuity assets are simultaneously regrowing your entire portfolio value, in a much more tax friendly manner.  (One bucket is intentionally draining while other buckets are filling back up at the same time.) So your total portfolio value is never depleted along the way, it's just shifted from taxable to tax-free status as we liquidate the taxable "problem" asset - while regrowing the balance tax-free or at least tax-advantaged inside of other accounts. 
 

Ultimately, there is no logical or mathematical reason to grow and preserve a large traditional IRA balance anymore, especially if you can be liquidating it in the form of high levels of guaranteed lifetime income—which in turn gives you the freedom and flexibility to simultaneously rebuild your wealth in more tax-friendly vehicles like Roth IRAs, after-tax brokerage accounts, or life insurance.

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Ready to See How This Could Work for You?
 

This strategy isn't for everyone. It requires precision, timing, tax planning, and income mapping.  But for those who want to defeat the IRA tax trap and secure both lifestyle and legacy…
 

It’s a game-changer.
 

If you’d like to see how this approach could be customized to your exact numbers, let’s book a strategy session and walk through it together. You only get one chance to retire right—and this might be the pivot that changes everything.